Asmussen said in an interview in New York today that there
is “a certain margin” on rescue loans to Greece and Ireland
and that “we have to look at this” as part of a package of
measures being drafted for a summit of European Union leaders at
the end of March.

“We can look at this if countries at the same time would
be willing to accept a kind of national fiscal framework to be
enshrined in their constitution,” he said at the Bloomberg
European Debt Briefing Conference hosted by Bloomberg Link.

Asmussen’s comments are the most explicit outline yet of
the thinking in Chancellor Angela Merkel’s government on the
sovereign debt crisis. Germany, as Europe’s biggest economy, is
leading euro-region efforts to restore investor confidence as
the debt turmoil buffets Portugal and Spain just two months
after Ireland joined Greece in having to ask for outside help.

The package now being crafted will include short-term
crisis-management measures while adding flesh to the bones of a
planned permanent safety net for indebted countries, Asmussen
said. It will also feature an “enhanced” set of rules
governing the euro, known as the Stability and Growth Pact, and
closer economic policy coordination.

Debt Buybacks

Asmussen said there was a debate on debt buybacks though
declined to give Germany’s position, saying only that “we have
to discuss this as part of the comprehensive package.”

“There is a debate and will continue to be one probably
until the March European Council about the scope” of the rescue
fund, the European Financial Stability Facility, “and what the
EFSF can do,” he said. “I’m not in a position to comment on
individual activities right now.”

The rate on the rescue loan to Ireland, for example, is
about 300 basis points above the bailout fund’s borrowing costs.
Greece pays about 5 percent for its European aid.

German bond yields have risen this year, reflecting
investor bets that the German economy would bear an increased
share of the cost of supporting debt-addled countries. Ten-year
bunds yielded about 3.15 percent today, up from 2.96 percent at
the end of 2010.

Asmussen cited the German model of a “debt brake,”
anchored in the German constitution last year, which limits
deficits at state and federal level, and urged a similar model
across Europe.

“We have to fix the difficulties we have,” Asmussen said.
“It’s not a crisis of the euro. It’s a debt situation that is
difficult in some euro zone countries. The Chancellor very
clearly said we will do whatever necessary to defend the
stability of the euro zone and we have to prove this at the end
of March.”

Barroso Dinner

The European Commission, the 27-nation European Union’s
executive agency, joined the European Central Bank earlier this
month in calling for additional steps, urging agreement by early
February. EU leaders are scheduled to meet in Brussels Feb. 4.

Commission President Jose Barroso is due to have dinner
with Merkel at the government’s Meseberg retreat outside Berlin
today to discuss a response to the debt crisis. Economic and
Monetary Affairs Commissioner Olli Rehn meanwhile briefed
lawmakers from Merkel’s Free Democratic Party coalition partner,
one week after the party criticized a proposed expansion of the
440 billion-euro ($600 billion) EFSF fund.

The coalition parties face elections in seven of Germany’s
16 states starting in less than four weeks, and Merkel risks
alienating voters by agreeing to any additional measures to stem
the crisis. Germany is already the largest contributor to the
EFSF and the Greek rescue.